In Harrod-Domar Model, if the growth rate of income is 8% and the capital-output ratio is 4, then the…
In the Harrod-Domar growth model, the growth rate of national income (g) equals the saving rate (s) divided by the capital-output ratio (v): g = s / v. Rearranging this…
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In Harrod-Domar Model, if the growth rate of income is 8% and the capital-output ratio is 4, then the saving rate must be:
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Correct answer A
In the Harrod-Domar growth model, the growth rate of national income (g) equals the saving rate (s) divided by the capital-output ratio (v): g = s / v. Rearranging this formula gives s = g × v. Substituting the growth rate g = 8% and the capital-output ratio v = 4 yields s = 8% × 4 = 32%. Therefore,
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UGC NET Economics